NUMBER ONE Success System - HPVS

23 Aug 2007


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At common law, a mortgage was a conveyance of land that on its face was
absolute and conveyed a fee simple estate, but which was in fact
conditional, and would be of no effect if certain conditions were not met
--- usually, but not necessarily, the repayment of a debt to the original
landowner. Hence the word "mortgage," Law French for "dead pledge;" that is,
it was absolute in form, and unlike a "live gage", was not conditionally
dependent on its repayment solely from raising and selling crops or
livestock, or of simply giving the fruits of crops and livestock coming from
the land that was mortgaged. The mortgage debt remained in effect whether or
not the land could successfully produce enough income to repay the debt. In
theory, a mortgage required no further steps to be taken by the creditor,
such as acceptance of crops and livestock, for repayment.
The difficulty with this arrangement was that the lender was absolute owner
of the property and could sell it, or refuse to reconvey it to the borrower,
who was in a weak position. Increasingly the courts of equity began to
protect the borrower's interests, so that a borrower came to have an
absolute right to insist on reconveyance on redemption. This right of the
borrower is known as the "equity of redemption".
This arrangement, whereby the mortgagee (the lender) was on theory the
absolute owner, but in practice had few of the practical rights of
ownership, was seen in many jurisdictions as being awkwardly artificial. By
statute the common law position was altered so that the mortgagor would
retain ownership, but the mortgagee's rights, such as foreclosure, the power
of sale and the right to take possession would be protected.
In the United States, those states that have reformed the nature of
mortgages in this way are known as lien states. A similar effect was
achieved in England and Wales by the Law of Property Act 1925, which
abolished mortgages by the conveyance of a fee simple.